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Statement on behalf of David Richwhite

Statement on behalf of Midavia Rail Investments BVBA and David Richwhite

18 June 2007

Midavia Rail Investments BVBA and David Richwhite have agreed a settlement with the Securities Commission. Midavia and David Richwhite have been dealing with the Commission’s investigation and subsequent proceedings for over four years and have made the decision to settle the claim to put the proceedings behind them.

Once the Securities Commission’s penalties claim was struck out earlier this year the amount required to settle the claim was at a level at which it was more attractive to Midavia and David Richwhite to settle than continue fighting the litigation. The case was not scheduled to go to trial until June 2008. Taking into account the likely prospect of appeals, the proceedings could have continued for several more years.

While they consider the settlement amount does not properly reflect the lack of merit in the Commission’s proceedings, the settlement payment is only a little over half the amount claimed by the Commission, including interests and costs. It is less than 1/5 of the Commission’s maximum claim at the time it commenced proceedings. It is also at a proportionately lower level than the settlements the Commission reached with all the other defendants.

Importantly, it is also reached without any admission of liability. The fact that the Commission was prepared to settle for substantially less than the full claim and without any admission of liability no doubt reflects the Commission’s recognition that it faced a risk of losing if the claim went to trial.

Nevertheless, these proceedings are a chilling reminder to directors and substantial security holders about the potential reach of the no-fault, strict liability provisions of the current insider trading laws. Coupled with the serious implications of a finding of liability, under the current legislation the Securities Commission is able to demand and hold out for settlement payments that bear no relationship to the underlying merits of its claims. This has been a feature of its settlements with all defendants in these proceedings.

Fortunately for market participants, with the introduction of new laws later this year, the Securities Commission will no longer be able to issue proceedings unless it is able to claim that an insider had knowledge of the alleged inside information. This will preclude the type of hindsight review– with no allegation of fault or knowledge – on which these proceedings were based.


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